All the three economic institutions have legal and defined powers and
are responsible for those authorities, and do not need to be subject to
another institution.

Dr. Tahmasb Mazaheri, Former governor of the Central Bank of
Iran (CBI)

It seems that we need to offer a clear definition for the ‘economic team’ in
order to be able to comment on the performance of the incumbent government’s
economic policies. The government’s economic team can be defined as the
government’s chief policy-makers, namely the President and the first vice
president, as well as the economic ministers, including the head of the
Management and Planning Organization of Iran (MPO), the minister of finance
and economic affairs, the CBI governor, the minister of industry, mine and
Trade, and the minister of oil, which are generally effective. This
definition is more comprehensive than the conventional definitions which
introduce the Ministry of Finance and Economic Affairs and the CBI as the
economic team alongside the MPO because the authorities of these three
institutions, while maintaining legal independence of vote, execute the
policies the government delegates to them; and this is just normal and
customary!
In the breakdown of the economic policies, the CBI is responsible for
monetary and banking policies and, in this regard, it has legal independence
for decision making.

The MPO chief is responsible for financial-budgetary policies and the
government’s revenues and expenditures are formulated and implemented at
this institution. In this regard, the MPO is independent from the CBI and
the Ministry of Finance and Economic Affairs, and decides independently. The
Ministry of Finance and Economic Affairs also is in control of financial and
capital market policies as well as economic policies that deal with the
private sector and foreign investment, and has full authority in this
respect.

All the three economic institutions have legal and defined powers and are
responsible for those authorities, and do not need to be subject to another
institution. These institutions, while having autonomy, complement each
other. But the point is that, in some cases, each of these three
organizations decides in their own interests and proposes a policy in expert
discussions and reports. But in other cases, policies are being proposed by
an institution such as the CBI, which is not consistent with the overall
view of the government and the President. This contradiction leads to a
decision that is taken by the President himself. This means a decision is
made which is contrary to the expert and policy views of the said
institution. That is where the differences surface and the relevant
organization implements the communicated policy. After implementing these
policies, which is not the choice of the policymaker, the harmful effects of
the decision would hurt the organization.

Now, if the relevant institution defends the decision, the expert body would
not cooperate; meantime, if they fail to defend the executive policies, they
would be questioned as to why this decision has been made.
This phenomenon has occurred over the past five years at the Ministry of
Finance and Economic Affairs, the MPO and the CBI. For example, regarding
monetary policies, interest rates on deposits and foreign exchange rates,
what has been implemented has been different from expert opinions of the
CBI. The CBI has always defended a single rate for foreign exchange however
the policy of suppressing the exchange rate and using it as an anchor of
inflation control has been communicated by the government to the CBI and the
latter has obeyed. Today that the negative effects of this policy have been
unveiled, the CBI can neither defend these policies nor can it say they have
not been approved by it and have been imposed by the government. Spending
more than what the budget decides and the consequent budget deficit is not
approved by the expert body of the MPO. The government’s enthusiasm to
provide more service to the people would cause the government to expend more
than its revenues and cause budget deficits. The result was that liquidity
under the first term of the Rouhani administration was two and a half times
higher and created the potential for increasing inflation and the growth of
prices for goods and services.

Under the
current circumstances, the economic team is defined within a single set as
long as it is subject to the policies of the government and the President.
The heads of the MPO, the CBI and the minister of finance and economic
affairs are responsible for implementing the communicative policies; thus
changing the economic team, if not accompanied by a revision of the economic
policies of the government and the President, would not make a difference.
But if changes in the cabinet are accompanied by a change in the views of
the government and the President, we can expect tangible changes. Of course,
a change in the views of the President and the government can make the
current economic team counter new conditions that could lead to their
success.